Are two-year leases a good idea?

I hear this question every now and again, and the reason behind it is obvious: landlords prefer stable renters and don’t want to pay a commission every year to find new tenants if they can avoid it, and tenants want the security of a place to live with no rent increase after the first year. On the face of it, this seems like a win-win proposition.

But that only works if all the planets align correctly and the moon is in the seventh house. To be fair, with all due respect to The 5th Dimension, that happens much more often than not. But what if the renters turn out to be the Tenants from Hell or decide that they want to buy a home or move elsewhere after a year? Then everyone is in a pickle, and I start getting calls about the best way to break a lease.

When this subject rears its head during showings, here’s the suggestion I offer my clients: sign a one-year lease with a clause that guarantees no rent increase after the first term and call it good. That way everyone is happy, and if either party has second thoughts during the first year, there’s a path out of the relationship. The hope is that both the tenants and landlord behave in a professional manner, the relationship is a mutually respectful and beneficial one, and a multi-year occupancy by the tenants is a welcome possibility.

Unfortunately, I speak from several ugly client experiences. All the best-laid plans and warm handshakes at the start of a lease term mean nothing if either party decides not to live up to its end of the deal. And when things go south between a landlord and tenant, they tend to go there in a big hurry.